The report on the Keystone XL pipeline said the risks are
low provided TransCanada complies with U.S. law and follows
recommended safeguards, according to the report posted today on
the department’s website. A final decision on the project will
be made this year, the State Department has said.

Environmentalists oppose the project, citing greenhouse-gas
emissions and risks of a spill tainting the Ogallala aquifer in
Nebraska’s Sand Hills region that supplies drinking water for 2
million people. Senator Mike Johanns, a Nebraska Republican,
wants the line rerouted. Pipeline foes have been arrested daily
this week outside the White House as they staged sit-in
protests.

“The analyses of potential impacts associated with
construction and normal operation of the proposed project
suggest that there would be no significant impacts to most
resources along the proposed project corridor,” assuming
precautions are taken, the State Department found.

“Support for Keystone XL continues to grow because the
public, opinion leaders and elected officials can see the clear
benefits that this pipeline will deliver to Americans,” Russ
Girling, TransCanada’s chief executive officer, said in a
statement. “The fundamental issue is energy security.”

Clinton Decision

Secretary of State Hillary Clinton has the final say on the
pipeline project because it crosses an international border. The
State Department was given the authority under an order issued
in 2004 by President George W. Bush.

“I’m very pleased,” Canadian Natural Resources Minister
Joe Oliver said in a telephone interview from Toronto. The State
Department report is “an important step towards getting this
finally approved.”

The oil industry, 14 U.S. senators and four unions
representing 2.6 million workers have pushed for swift approval
of the pipeline, which they said would help keep energy costs
down, stimulate $20 billion in spending for the U.S. economy and
spur creation of 118,000 jobs.

“The nation’s quintessential shovel-ready project is a
step closer to reality,” Cindy Schild, the American Petroleum
Institute’s refining manager, said today in an e-mailed
statement. “We need this critical project because more jobs and
a move to secure energy equal a stronger economy.”

‘Potential Problems’

The State Department’s report failed to back up its
conclusions, Susan Casey-Lefkowitz, international program
director for the Natural Resources Defense Council in New York,
said in an interview.

“When you read through the executive summary, they are
noting a lot of real potential problems,” Casey-Lefkowitz said.
“For them to do that and then conclude there are no significant
impact minimizes the very legitimate concerns of people who
depend on the Ogallala aquifer and the 1,000 rivers that this
pipeline would cross.”

The 1,711-mile (4,346-kilometer) pipeline would have the
capacity to deliver 700,000 barrels of crude oil a day extracted
from oil sands in Alberta, Canada, to Oklahoma and Texas. The
route would cross Montana, South Dakota, Nebraska and Kansas
before delivering oil to Cushing, Oklahoma, and southeastern
Texas.

Declining Supplies

The pipeline is needed to maintain supplies of heavy crude
oil to Gulf Coast refineries as imports decline, according to
today’s State Department report. Imports from Mexico and
Venezuela are falling while refining capacity in the Gulf Coast
is projected to rise by 500,000 barrels a day by 2020.

Alberta oil is separated from sand and clay with intense
heat in a process that releases more greenhouse gases than
pumping conventional crude. Representative Henry Waxman, a
California Democrat, has said the pipeline will carry “the
dirtiest source of transportation fuel” available.

“The development of the oil sands would continue whether
or not this pipeline or any other pipeline were put forward,”
Kerri-Ann Jones, assistant secretary in the department’s Bureau
of Oceans and International Environmental and Scientific
Affairs, said today on a conference call with reporters. “This
oil sands is going to be developed.”

The State Department review cited studies of a 1979 spill
in terrain similar to Nebraska’s that “suggest that impacts to
shallow groundwater from a spill of a similar volume in the Sand
Hills region would affect a limited area of the aquifer around
the spill site.”

Effect on Water

The department’s report said, “Potential surface and
groundwater impacts are typically limited to several hundred
feet or less from a spill site.”

Johanns said he is “tremendously disappointed” the
department is backing a pipeline crossing the Sand Hills region.

“The State Department is now one step away from giving the
green light to a project that could have grave consequences for
our state,” Johanns said in an e-mailed statement.

The U.S. Environmental Protection Agency asked the State
Department in June for information to clarify the potential
effect on groundwater from oil spills, the impact on emission
levels at Gulf Coast refineries and the amount of greenhouse
gases that would be generated by the project, among other
issues.

Trucks, Alternate Routes

The State Department concluded that alternatives to the
pipeline would be unworkable or in some cases would result in
greater environmental damage, according to an executive summary
of the report.

Transporting oil from Canada by trucks “would also result
in substantially higher greenhouse-gas emissions and a higher
risk of accidents than transport by pipeline,” according to the
report.

The study examined 14 alternative pipeline routes, all of
which were found to be impractical or a greater environmental
risk than the route proposed by Calgary-based TransCanada.

In some cases, the report released today imposes
requirements on TransCanada that weren’t included in an earlier
draft. The company would have to retain an independent
consultant to review the placement of valves and the need for an
“external leak detection system” in environmentally sensitive
areas, according to the summary.

“This is not a final decision,” Jones said. “This is one
point in this process.”

Serving ‘National Interest’

The State Department must decide whether the project will
“serve the national interest,” Jones said. That review will
include concerns such as U.S. energy needs and foreign-policy
considerations.

Nine public meetings on the project will be held in
Washington and the affected states.

“Our government has taken action to secure Canada’s
position as a stable, secure and ethical energy superpower,”
Andrew MacDougall, a spokesman for Canadian Prime Minister
Stephen Harper, said yesterday in an e-mail. “We have committed
to developing Canada’s energy resources in an environmentally
sustainable way.”